Non-Resident Real Estate Clients

Federal Non-Resident Return for Real Estate

Canadians who own rental property in the United States are required to file a Form 1040NR each year to report the income earned from that property. This annual filing includes documenting all rental revenue received, detailing the associated expenses, and claiming depreciation on the property, which helps reduce taxable income over time. Even if the rental income is modest or if expenses offset most of the earnings, non-resident property owners are still obligated to submit a U.S. non-resident tax return to stay compliant with IRS rules.

When a Canadian sells U.S. real estate, the transaction remains taxable in the United States, regardless of where the seller lives. A U.S. tax return must be filed for the year of the sale to report the gain, calculate the actual tax owing, and claim any applicable deductions or adjustments. Under the FIRPTA rules (Foreign Investment in Real Property Tax Act), the IRS requires the buyer to withhold a percentage of the gross selling price at the time of the sale. This withholding is not necessarily the final tax—it’s simply a prepayment. If the true tax liability based on the gain is lower than the amount withheld, the seller can claim the difference by filing a U.S. non-resident tax return and will receive a refund for the excess amount. This ensures that non-resident sellers properly report their gains while also preventing underpayment of U.S. taxes on foreign-owned property.